Philippines: Amended VAT-related guidance for certain registered business enterprises

Amended guidance on VAT-related issues for registered business enterprises under Rule 18 Section 5 of implementing regulations under CREATE Act

Amended VAT-related guidance for certain registered business enterprises

Article Posted date 19 September 2023

The Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 91-2023 (dated 11 September 2023) providing amended guidance on value added tax (VAT) related issues for registered business enterprises (RBEs) under Rule 18 Section 5 of the implementing regulations under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

Key provisions of the guidance include:

  • All RBEs that will continue to avail of their existing tax incentives subject to Section 1, 2 and 3 of Rule 18, Section 5 continue to benefit from the duty exemption, VAT exemption on importation, and VAT zero-rating on local purchases as provided in their respective Investment Promotion Agency (IPA) registrations.
  • Registered export enterprises (REEs) whose income tax-based incentives have expired, may continue to benefit from that VAT zero-rating on local purchases until the electronic sales reporting system of the BIR is fully operational, or until the expiration of the transitory period, whichever comes earlier.
  • An RBE classified as domestic market enterprise (DME) that is located inside the economic or freeport zone during the transitory period will be allowed to register as a VAT taxpayer.
  • The duty exemption, VAT exemption on importation, and VAT zero-rating on local purchases would only apply to goods and services directly attributable to and exclusively used in the registered project or activity of REEs. 

The rules apply prospectively. DMEs inside the economic or freeport zone that register as VAT taxpayers will not be allowed to claim VAT refund for transactions prior to the effective date of the rules.

The amended rules will take effect immediately following publication in a newspaper of general circulation.

Read a September 2023 report prepared by the KPMG member firm in the Philippines

 

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